Addressing the Climate Problem: Choice between Allowances, Feed-in Tariffs and Taxes

Publikation: Working paperForskning


Instruments chosen to pursue climate related targets are not always efficient. In this paper we consider an economy with three climate related targets for its electricity generation: a given share of “green” electricity, a given expansion of “green” electricity, and a given reduction of “black” (fossil based) electricity. At its disposal the country has three instruments: an allowance system (tradable green certificates), a subsidy system (feed-in tariffs) and a Pigouvian fossil tax. Each of these instruments may be used to attain any of the given targets. Within the setting of the model it is verified that each kind of the target has only a single efficient instrument under certainty, and that there is a deadweight loss of using other instruments to achieve the target. Similarly, there is also an analysis of instrument choice when several targets are to be attained at the same time. The paper also discusses the case of simultaneous targets as well as the relevance
of the various targets.
UdgiverMunich Society for the Promotion of Economic Research ‐ CESifo
Antal sider32
StatusUdgivet - 2018
NavnCESifo Working Papers

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